Equity
What a property is worth minus what is owed on its mortgages and other liens; it decides whether an owner in trouble can sell and walk away.
Definition
Equity is the amount a property is currently worth minus the amount owed on any mortgages and other liens against it. In a hypothetical example, a house worth $300,000 with a $180,000 mortgage balance has about $120,000 in equity before selling costs.
Equity decides what an owner can do. An owner in pre-foreclosure with real equity can sell, pay off the loan and keep the difference, which makes a negotiated sale possible. An owner with little or no equity may need a short sale instead. Public records give you a rough estimate: the county's assessed or market value, minus recorded mortgages, judgment liens, tax liens and HOA liens. Treat it as a starting point. Recorded loan amounts show the original balance, not the payoff, and assessed values often lag the market. Get a payoff figure before you make a firm offer.
Source: consumerfinance.gov
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